Nokia CEO: Primary Growth Target Not Telecommunications But Data Centers
Away from telecommunications business
Nokia CEO Pekka Lundmark stated during the Q3 2024 earnings conference call that telecommunications is no longer the company’s primary growth market. Instead, the company shifted its focus of growth towards data centers. “There will be other areas, but this will be the top priority, “he said.
-During the third quarter 2024 earnings conference call, Lundmark said, “Telecommunications will not be a growth market for Nokia.”
-On the contrary, the CEO expressed optimism about the growth prospects of the company entering the GPU as a service market.
-The agreement reached with CoreWeave in September this year is leading the company towards data center development.
It is shocking to stay away from telecommunications business. But it is not surprising considering the challenges the company has faced in winning major telecommunications contracts over the past year. However, the agreement reached with AI giant CoreWeave in September this year has brought new vitality to Nokia. CoreWeave has chosen Nokia to deploy its IP routing and optical transmission equipment globally as part of its extensive backbone network construction. And it immediately deployed it in data centers in the United States and Europe.
Raymond James analyst Simon Leopold said that winning the CoreWeave order is good news for Nokia. Because it can give Nokia some exposure in the AI field. He is also curious if Nokia has a long-term strategy to shift customers from telecommunications infrastructure to more enterprise level opportunities.
Lundmark responded, “This is clearly the core of our strategy.” He stated that Nokia’s total addressable market (TAM) in the telecommunications sector is 84 billion euros. However, the current total addressable market in data centers is 20 billion euros.
“Although telecom TAM is expected to recover next year, we must be realistic,” Lundmark said. “What I mean is that telecom TAM is no longer an important growth market.”
In contrast, data centers is a growth market.
“The reason why CoreWeave is so important is that they are now a leading GPU as a service company,” Lundmark said. “They have almost adopted our entire product portfolio, including IP side and optical side products. We know that AI is driving new business models, and one obvious business model is GPU as a service.”
He said that T-Mobile mentioned GPU as a service during its recent capital market day. “They are discussing seeing it as an additional opportunity for their business,” Lundmark said. “Of course, the company also has great development opportunities in the fields of ultra large scale data centers and small data centers
He said that once Nokia completes its $2.3 billion acquisition of optical communication supplier Infinera in the first half of 2025, Nokia will hold a capital market day event where “we will delve into growth areas beyond telecommunications.”
He said that Nokia has already successfully entered the data center market in terms of IP. And the subsequent Infinera transaction will significantly increase the company’s involvement in optics. Data centers not only require GPUs, but also optical networks to support their AI workloads.
Lundmark stated that the role of optics will not only increase in the connections between data centers. But also in the connections between servers within data centers. “Once that stage is reached, the size of this market will be extremely large,” he said.